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Chapter 3: Capturing Customer Value: Price to Exchange Back To Chapter

3.13: Price Adjustment Strategies II

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Price Adjustment Strategies II

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Price adjustment strategies allow businesses to adjust prices based on the customer's location, behavior, demand, and the country where products are sold.

These include Dynamic and internet pricing, which adjusts prices based on real-time demand, competition, and customer needs.

For instance, airlines use dynamic pricing to modify ticket prices according to demand, whereas e-commerce platforms like Amazon adjust product prices based on the customer's needs and browsing history.

Next is International pricing, where variations in exchange rates, tariffs, regional expenses, and competitive dynamics among countries lead to pricing differences for the same product.

For example, the pricing of Starbucks is higher in Switzerland than in the US because it is positioned as a luxury brand.

Lastly, Geographical pricing adjusts prices based on location due to variations in distribution costs, promotions, and market conditions.

Examples include charging customers different prices based on geographical zones, like a furniture company charging higher for deliveries in a zone far from their warehouse or customers having to cover the shipping charges from the warehouse.

3.13: Price Adjustment Strategies II

Price adjustment strategies also vary based on customer demand, location, and competition.

• Dynamic and Internet Pricing is a strategy where prices are continuously adjusted based on individual customer needs. Uber, for example, increases fares during peak hours due to high demand. Similarly, Amazon changes product prices daily, considering factors like demand, competition, and customer behavior.
• International Pricing involves setting different product prices in different countries based on costs, economic conditions, and purchasing power. For instance, Apple's iPhone prices differ across countries due to import duties and transportation costs.
• Geographical Pricing adjusts prices according to the customer's location. It accounts for distribution costs, market conditions, and promotional variations. Strategies include:
1. ‣ Zone Pricing, where prices vary by geographical zone and corresponding shipping costs.
2. ‣ F.O.B Origin Pricing, where customers pay freight from factory to destination, for example, bulk book orders from a publisher.
3. ‣ Uniform Delivered Pricing where the same price is charged regardless of location. Amazon Prime offers all members free shipping, regardless of location.
4. ‣ Freight Absorption Pricing, where the seller bears freight charges.
5. ‣ Basing-point pricing is where all customers are charged standard freight costs from a selected basing point, irrespective of actual distance.

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